Tobacco

Sweden's Snus Tobacco Invades, but Americans Prefer Snuff

Josh Pedigo likes to spit. The 27-year-old handyman from Wentworth, N.C., started using Skoal snuff when he was 10 years old, and now he spits even when he doesn’t have a wad of tobacco in his lower lip. “It’s just a habit,” he says while building a dog fence in the heat of the afternoon.

Pedigo’s habit poses a problem for Swedish Match (SWMA:SS), the world’s largest maker of spitless tobacco called snus, as it accelerates its U.S. expansion. Traditional American snuff such as Copenhagen and Skoal goes inside the lower lip, triggering salivary glands that prompt users to spit to avoid swallowing tobacco juice. Snus, more popular than cigarettes in Sweden, is tucked in the upper lip and doesn’t require spitting.

Taking a dip of tobacco without spitting isn’t enough to persuade the likes of Pedigo to switch to Swedish Match’s General, the top-selling brand of snus (rhymes with “moose”). The reluctance makes it harder for the Stockholm company to win over consumers of such American smokeless brands as Reynolds American’s (RAI) Camel and Altria Group’s (MO) Marlboro and Skoal. “It will be a long haul to get Americans to switch to the upper lip,” says Patrick Shehan, owner of Tar Heel Tobacco, which has seven stores in North Carolina and Virginia. “Americans use the lower jaw going way back to farmers chewing a big wad.”

Mostly sold in pouches that look like miniature tea bags, snus is used by more than a quarter of adult men in Scandinavia. Swedish Match hopes to increase its share of the $80 billion U.S. tobacco market by selling snus in more U.S. stores and cutting the price of General from the typical $3.79 to 99¢ for a limited time in new markets. A big part of the pitch is that snus is more convenient than stepping outside for a smoke or finding a cup to spit into. General “allows you to stay in the moment,” says Clark Darrah, a vice president in the company’s American division.

Swedish Match, which also makes cigars, matches, and related products, hasn’t disclosed its spending on the U.S. snus expansion but says the expenses hurt operating profit in the first quarter. Its snus and snuff unit last year accounted for 40 percent of its 12.5 billion kronor ($1.87 billion) in sales.

Before the commercial production of cigarettes, American farmers twisted tobacco into knots and chewed on it for nicotine. Swedes brought their tobacco across the Atlantic in the 1900s, but snus still holds a small share of a U.S. smokeless market dominated by moist snuff and chewing tobacco. U.S. snus sales have grown about 9 percent a year recently, to $175 million last year, according to Darrah. Over the past year, Swedish Match has boosted General’s U.S. share to about 7 percent from less than 1 percent. Camel snus dominates with about 81 percent, while Marlboro and Skoal account for the remaining 12 percent, Darrah estimates. While smokeless tobacco is less harmful to the lungs than smoking, it’s associated with an increased risk of pancreatic cancer and other maladies, according to Sweden’s National Institute of Public Health.

Steven Shaffer, a real estate investor in Greensboro, N.C., says he’s used snuff for almost 30 years. Spitting “is ingrained in my psyche,” says Shaffer, 47, who spits Reynolds’ Grizzly snuff into an empty plastic water bottle when in meetings and says he’s more likely to quit using tobacco than switch to a spitless product.

To get dippers like Shaffer to give its spit-free variety a try, Swedish Match passes out samples of General at hundreds of concerts, Nascar races, and other events every year. The Swedish company started to sell snus in the U.S. in 2006, focusing on high-end tobacco shops. It aims to be in almost 20,000 U.S. stores by the end of this year, up from 13,000 in March. In stores, brochures advise users to place the snus “discreetly under your upper lip. Wait for a slight tingling sensation. Experience up to 30 minutes of satisfying flavor.”

Altria and Reynolds, the biggest U.S. sellers of tobacco, dominate cigarette racks, leaving Swedish Match with less visibility and forcing the company to pay retailers for shelf space, according to Darrah. In a Sheetz convenience store in Greensboro, General isn’t in a tobacco display that stretches for about 20 feet along the wall behind the checkout counter. Tucked in a corner, it’s hard to spot among the clutter of brands.

Pedigo, the North Carolina handyman, tried General snus last month and says he’ll “probably keep a can of it around,” though Skoal Long Cut Berry Blend remains his regular dip. “It would be really good to take to the movies,” Pedigo says. “You don’t want to be seen spitting in a can because they may throw you out.”